Romania Plans Second Eurobond Sale This Year to Fund Budget Gap

Romania plans to sell international bonds for the second time this year to help cover its budget deficit, Budget Minister Liviu Voinea said.

The benchmark-size offering would probably raise at least 1 billion euros ($1.3 billion) in Europe’s common currency, Voinea said in an interview in Krynica, Poland, today. The yield on Romania’s 2019 eurobonds rose two basis points, or 0.02 percentage point, to 4.16 percent as of 2:22 p.m. in London, up from a record low of 3.4 percent in May. Similar-maturity debt from Poland yields 2.14 percent.

“We will issue this year because it’s part of our multi-year strategy, but we are not under pressure to do so today or tomorrow,” Voinea said. “We’ll find the best window of opportunity.”

The Finance Ministry is seeking to raise the equivalent of 2.5 billion euros abroad this year, having issued $1.5 billion so far at a record low 4.5 percent yield in February. The yield on the 10-year securities climbed six basis points today to 5.32 percent. The government will probably wait to sign its third agreement with the International Monetary Fund to bolster investment sentiment before proceeding with the sale, said Vlad Muscalu, Bucharest-based chief economist at ING Bank Romania SA.

The IMF’s board of directors will discuss Romania’s precautionary loan in the last 10 days of September, Voinea said today. The 4 billion-euro loan is split equally between the Washington-based lender and the European Union. The European Commission will probably approve it on Oct. 15, during a meeting of economic and finance ministers known as Ecofin, providing Romania with a two-year agreement, he said.

Falling Behind

The accord would be Romania’s third consecutive package and the smallest since 2009, when the country got a 20 billion-euro bailout from the lenders.

“They are probably waiting to sign the precautionary agreement with the IMF in the hope of a favorable market reaction, but I think they’re probably wrong to count on that,” Muscalu said by e-mail. “The ministry has fallen behind its domestic issuance plan, so it will be hard to skip this issue.”

The ministry raised 31 billion lei ($9.1 billion) in debt from the domestic market this year by the end of August, according to ING data. The administration may raise about 35 billion lei in the first nine months, below an annual target of 49 billion lei outlined in the ministry’s 2013 strategy, according to ING estimates.

Five-year credit-default swaps, contracts insuring Romania’s debt against default, dropped to 176 basis points in May, the lowest since 2008, from 769 basis points in February 2009. The swaps were at 209 basis points today.

Under its agreement with the IMF and the EU, Romania plans to sell a 15 percent stake in natural-gas producer Romgaz at the end of October and other stakes in hydropower generator Hidroelectrica SA and power distributor Electrica SA in the first half of next year, Voinea said.

The government also aims to sell about 40 percent in Romtelecom SA, the local unit of Hellenic Telecommunications Organization SA (HTO), late this year or early in 2014, Voinea said.

To contact the reporters on this story: Radoslav Tomek in Krynica, Poland at rtomek@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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